Wednesday saw decent volatility in markets. Cable was 50% above the simple average daily range of the past month, with the range on EURUSD (just over 100 pips) bang on the average of the same period. We could well see the opposite today with the ECB meeting taking place, together with the press conference which usually brings greater volatility to the single currency. The ECB have cut rates to the bone, started buying asset-backed securities last month and have continued to discuss the possibility of buying other assets. There have also been some tensions this week with regards to ECB President Draghi’s leadership style. The main issue for markets though is the extent to which he hints at further easing measures to come and the ability of the ECB to deliver upon them. This gets harder and harder as interest rates are near enough zero and this is also leading to lower bond yields within the Eurozone as the threat of deflation looms large.
The scope for some sterling volatility remains, given the price action seen Wednesday and also the production data released at 09:30 GMT today. The market looks for a 0.4% increase. The Bank of England also meets, but this is seen as a non-event as interest rate hike expectations from the middle of the year have disappeared. Aussie jobs data overnight has seen the unemployment rate steady at 6.2% (as expected), with 24k gain in employment, following Sep’s decline. The recovery in the Aussie was broadly in line with that seen on other majors vs. the USD overnight.